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18 October 2007

Transfers, US News Gaming, and Brand Dilution

Entering credentials of transfer students are irrelevant to U.S. News ranking calculations. As a result, many have speculated that transfers are fertile ground for U.S. News gaming. This post examines data on 2L transfers, which the ABA recently collected and released in the 2008 Official Guide. In short, there are a lot of transfers, particularly to schools with high U.S. News rankings. Here the breakdown by US News Tier:

Why am I posting on transfer students? That is an important subtext. During a recent conversation, hiring partners at one of the nation's largest and most prestigious firms (biglaw X) complained to me that they were running across a lot of transfer students at elite law school Y (where pre-screening is not permitted) with nondistinguished 1L records from Tier 2 or 3 schools. As a follow-up to our conversation, I crunched the numbers from the 2008 Official Guide.

But the more salient issue is how firm X responded in the absence of hard data. Because the transfer students could not meet the grade cutoff for an interview at their old school, (a) they did not receive a callback, (b) firm X wasted 30 minutes x 2 lawyers for each incident, and (c) a perception took root that elite law school Y was diluting its product through an unprincipled transfer policy designed to "sell" 2L admission at full tuition price in order to constrict and subsidize a smaller crop of 1L students with higher LSAT scores--and through the process, increase its US News ranking. The hiring partners had a clear, unflinching grasp of the underlying dynamics. Did administrators at law school Y really believe that no one would notice?

In our Student Quality as Measured by LSAT Scores study, Andy Morriss and I theorized that a heavy intake of transfer students was likely the preferred gaming strategy of high ranked schools (lower ranked schools, in contrast, relied upon part-time programs). For schools who were in the U.S. News first quartile in 1992, constriction of the 1L full-time class over the next 12 years was associated with larger gains in median LSAT scores. (At the time, we lacked the data on transfers, which we thought would reveal a revenue-neutral strategy that worked in lockstep with 1L constriction.)

But here are the difficult institutional questions:

Reputation. Is a slight increase in median 1L LSAT
scores worth the damage to a law school reputation among employers? Arguably law school Y's biggest mistake was taking all comers rather than building a larger pool of transfer applicants. Apparently, some Tier 1 and 2 law schools actively solicit transfer applicants and thus can be more selective. Over time, this could easily evolve into a second, substantial admissions process.

Payoffs to the school. Although students and faculty may be jubilant over a bump in the rankings from #14 to #12, or #22 to #19, are more opportunities thereby available to graduates, especially if the gaming strategy is being flagged by key employers?

Payoffs to transfer students. And what about the students with nondistinguished records from lower ranked schools who incurred huge debt for a elite credential in order to subsidize a high LSAT 1L--are these transfer students, with a paucity of callbacks and no 1L peer relationships, clearly better off? See 2005 LSSSE Report (showing heightened social isolation for transfer students)

Externalities on legal education. Can we all agree that any underlying increase in U.S. News rank has zero substance? If so, should the ABA crack down on law schools that divert a lot of resources toward recruiting 2L students for no other purpose than boosting entering credentials of 1Ls?

Without further ado, here is the graph for transfers (Tiers 1-2), ordered by 2007 U.S. News rankings and normalized as a percentage of each school's graduating class [click-on to enlarge]. In Tier 1, Georgetown (+14%) and Washington University (+18%) have the largest net inflow of transfer students. In Tier 2, the big net gainers are Florida State (+20%) and Rutgers-Camden (+16%). The graph for Tiers 3-4, in many respects the mirror opposite of Tiers 1-2, is after the jump.

Tier I schools' transfer policies do not necessarily represent "revenue-neutral gaming" of the U.S. News rankings. In some cases they may represent a revenue enhancement strategy. For some schools, classroom space and faculty teaching hours are severe constraints and may operate as a hard cap on the size of the entering 1L class: X sections of Y students each, where X is limited by the number of faculty available to teach the foundational 1L curriculum and Y is limited by the size of the large lecture rooms where most 1L classes are taught. The incremental cost of expanding the 1L class beyond X times Y may be very high as it necessitates hiring more faculty and adding more classroom space. In contrast, most upper-level classes have smaller enrollments and do not max out on enrollment. It's easier to absorb another 10, 20, or 30 upper-level transfers (or LLMs in schools that offer an LLM program) because they spread themselves across a broader upper-level curriculum. With tuition approaching $30,000 at elite schools, that extra 10-30 tuitions is a non-trivial bump in revenue at a relatively low cost to the institution. Certainly, you'd need to be careful not to dilute the quality of the student body, but in my experience most tranfers are hard-working and capable of doing the work, and they often have an extra motivation to prove that they "belong" at the elite institution.

When I worked at a T-15 school, I noticed what I thought was a general dissolution of the 1L class. The school accomplished it in the following way: a candidate would apply for admission that didn't have the credentials to get accepted outright at the institution. If the candidate was a legacy, had good alumni connections (connected to an alumnus serving on our board), or was the son or daughter of a well known philanthropist or wealthy individual, the administration would send a letter encouraging the candidate to consider transferring. (A letter stating the same thing was usually first sent to the candidate's well connected relation.) A transfer was usually guaranteed if the candidate performed in the top 30-40% of his or her 1L class.

Then, the candidate's name (if he or she didn't have a contingent guarantee) would be put on a special interest list that was monitored for the next year. The dean and dean of admissions would meat with faculty and other administrators to discuss the list. One significant factor in whether the candidate was accepted for transfer was whether his or her well connected relation was involved with the school or had a history or potential for financial contributions.

I crunched some numbers for three years of admits from this special interest transfer list. The average GPA for transfers offered an admit from this list was around 3.3 (the average for the 1L class for the same three year period was between 3.6 and 3.75). In some cases, the GPA's were as low as 2.58. The average LSAT for individuals offered an admit was somewhere between 160 and 164. There were a number of candidates that were offered an admit that had LSAT's between 155 and 159. The average LSAT for the 1L class was between a 167 and 169 for the same three year period.

I would have been okay with the dissolution if the transfer decisions from this list benefited disadvantaged populations but it only benefited well connected kids. In addition, none of the individuals accepted off this list usually had any difficulties paying for tuition. So, they weren't really taking out more debt just to gain elite status. Their parents were, however, paying a premium for the transfer (both in expected future contributions to the law school and in tuition). Then, most didn't have to worry about getting positions after school because they were already rather well connected.

I should note that this list is an exception to the regular transfer candidate process but most schools have a list like this. In addition, 40% of the individuals whose names made it to this list (which wasn't difficult if you had the money or connections), got in.

Great questions. If the strategy is constriction + transfers, then the total number of students would stay roughly the same. For example, reducing the entering class by 15, and increasing transfers by 15, has the same net results, including revenues. Some schools, I suspect, could augment income via transfers, but what are they likely to do with the extra money: scholarships for incoming students (i.e., cross-subsidies based on entering credentials) and more faculty seem like two likely options.

Regarding saving search costs for employers by skimming strong 1L performers from lower ranked schools: these students are not that difficult to locate--I am assuming transfers who have strong 1L records. As the post above suggests, students without strong records (but get OCI interviews because of a non-prescreening policy of many elite schools) can be viewed as a cost by prospective employers.

It seems to me students admitted through a stringent admissions policy, either as a 1L or 2L, would serve employers equally well. But if you are talking about increased capacity, but only through stringent, high achieving 2L admissions, that might be viewed as a plus by employers because there would be more elite graduates that in previous years. That is an key empirical point that I don't know the answer to.

That said, let's remember that any increase in transfers is probably driven by US News rather than educational policy or a desire to help out OCI employers.

From a "gaming U.S. News" perspective (rather than a "gaming prospective employers" perspective), wouldn't loading up on transfers hurt a school's student-faculty ratio, offsetting some or all of the gain in admissions selectivity?

As for the prospective employers, don't the higher-tier schools arguably save law firms the time and effort of scouting lower-tier schools for "worthy" prospects (much the same way that some "more prestigious" law reviews use offers from "less prestigious" law reviews to help decide which submissions they consider)?

At least in WashU's case I think the admittance of lots of transfers has more to do with the fact that they are highly profitable and less trying to game US News.

I've never seen or heard anything that says the 1L class has been getting smaller as the size of the transfer class has gotten bigger.

That having been said, I will admit to the one thing that I've seen that the school does to game the system is that the school gives very large awards to splitters (i.e., low gpa/high LSAT) in order to boost median LSAT.

But to their credit, they are spending lots of money to improve things that help the overall quality of the school, too, like in the facilities and bringing in new faculty, etc.

Abe, yes, my only good evidence of brand dilution is School Y. WashU 3L's experience suggests that Wash U may be doing a better job of drumming up strong tranfers.

I also agree with Anon -- highly competitive transfers can be a good thing. The empirical uncertainty that surrounds this issue is whether demand is outstripping supply. It appears that some (could be many or most -- that is an empirical question) of the law schools that engage in this strategy also aggressively solicit transfer applicants. The more applicants, the more selective a school can afford to be. School Y's mistake was, it appears, not building up the applicant pool, and Firm X noticed.

But my broader point is that this constriction / transfer dynamic is really being done to increase US News rankings. A side-effect may be more intimate classes for those who actually get in. The flipside, of course, is that transfer students substantially lose the benefit of relationships forged during the 1L year -- all in the pursuit of higher US News rankings.

Could you make the data available broken down by individual identified schools? One can draw inferences from the bar graph (presumably they are in descending US News order) but multiple ties make it impossible to know which bar relates to which school.

I see a lot more going on with transfer students. First, bringing in transfers -- higly motivated students at other law schools -- creates a new sense of competition in the second and third years, whereas normally second and third years may be complacent. Second, transfers allows a law school to give many students who would be denied admission as One-Ls a second chance if they have proven themselves at another law school. Third, transfers may allow a law school to keep its One-L class smaller and more intimate, which has many benefits for the culture of a law school. You seem to be ignoring the benefits and focusing on the US News "gaming" aspects of transfers.

Thought I'd chime in as I am a WashU 3L who transferred here from a Tier 2 school.

My pre-law credentials put me in WashU's 25th percentile. I know many of my fellow transfers who have MUCH lower credentials from tier 4 schools.

We all understand that we are "gaming" the system for the most part and are happy to pay full price to get access to a much better school. We have a lot of transfer students but I don't know anyone who I would say should not be here.

I don't know anyone who is flunking out or even in the bottom half (but I don't know everyone) and I think the lowest ranking I've come across from a fellow transfer is top 1/3rd with the students from lower tiered schools generally being in the top 10-15%. And while not empirical, it seems like everyone has stayed about the same rank. No one has shot way up or down.

Job prospects seem similar to non-transfers as well however I did seem to notice that the transfers were getting interviews with non-transfers about 10% lower in rank (i.e., transfer was top 10% at old school is getting interviews with top 20% non-transfers). There are some with no jobs yet but I know non-transfers in the same boat so I don't really chalk that up to being a transfer. I think there are more than a few WashU students in general who think they will just be handed a $160K job and don't try very hard on the job market and end up dissapointed. Those who try end up where they want it seems to me.

I know all of this is anecdotal but thought it would shed some light on what's going on at a school with a large transfer class.

Should I read your reply comment to mean that the anecdotal section of your blog post deals with one branch of one major law firm (X) and their perception of the transfer student quality from one elite law school (Y)?

At least among the partners at Firm X, it clearly bothered them that they were interviewing students that did not meet their cutoff. To their mind, the cutoff reflected firm judgment.

It is a separate issue how those lines get drawn. I am sympathetic to Corey's observation that those lines are underinclusive of excellent candidates (better than those on the right side of the line). If I construe your main point correctly, firms accept these costs because the main virtue of the sorting mechanism is that it is cheap. I agree. But that is not to say that some firms won't point to some veneer of principle to justify them.

The stratification of inputs is the key fact that makes this sorting process (first by school, then by grades) cheap for law firms. Yes, I completely agree with that.

I agree that there is an inconsistency among law firm on grades. But BCG Attorney Search has produced a guide for decoding law school transcript in order to made them commensurable. See this 400+ page document on the Top 50 law schools:http://www.bcgsearch.com/pdf/BCG_Law_Schoool_Guide_2007.pdf
Presumably this tool exists to reduce that inconsistency.

Abe,

I think your characterization "some of the less informed opinions within the article are sloppily formed" is itself sloppy.

Here is what I wrote in the original post:

"Reputation. Is a slight increase in median 1L LSAT scores worth the damage to a law school reputation among employers? Arguably law school Y's biggest mistake was taking all comers rather than building a larger pool of transfer applicants. Apparently, some Tier 1 and 2 law schools actively solicit transfer applicants and thus can be more selective. Over time, this could easily evolve into a second, substantial admissions process."

The recruiters at Firm X encounters several students from School Y with nondistinguished records Tier 2 and 3 schools (i.e., no where near the cutoff needed to get an interview at Firm X via OCI at the original school). I posit that School Y did this as part of a US News gaming strategy. But if a school is worried about brand dilution via this strategy, it ought to drum up enough "distinguished" applicants to meet its target transfer numbers. Higher demand for transfer applicants can easily bump up against adequate supply considerations. Some schools appear to have dealt with this through aggressive solicitation and recruiting; perhaps School Y failed to do so, or perhaps its demand is just really large.

I am talking about a broad admissions trend here. Nothing in my post was characterizing all or most transfer students as nondistinguished. Firm X is a large, repeat player in the market for entry level lawyers. When its recruiters notice a distinct break from past practice, I think that is interesting, especially as that anecdote is consistent with empirical data from other sources. Granted it is one data point, but not an insignificant one. And, as evidence by my comments above, I did not make any larger claims that depended upon that datapoint.

If or when I poll the Top 25 or 50 Vault law firms, that could yield some interesting new results. But I won't be reporting the results here for the first time. My blog post was a blog post, not a "study".

Re Bill's Oct. 23 comment at 10:39: I can't imagine that concern about "inputs" (beyond ease of sorting, based on snobbery) motivates the hiring personnel at law firms. These buyers don't really focus on the presumed inferiority of the erstwhile 50th percentile Tier 2 product. They simply worry that law schools are diluting the brand on purpose, for the cash, and so they're trying to exert some discipline to maintain the cheap sorting/selecting function they need.

While the verifiable data on transfer numbers provides a fascinating picture of potential US News gaming, some of the less informed opinions within the article are sloppily formed. It seems unfair to characterize many transfer students as having “undistinguished records” and to suggest transfer friendly schools suffer in reputation. This suggestion would have far more credibility if you had polled 25 or 50 of the Vault 100 firms. But to simply speak with a hiring partner or two at ONE firm does not form the basis for a credible study.

I think this study would have been far more effective had you stuck to focusing on the empirical data and the possible gaming aspects of the transfer process.

There seems to be an inconsistency in big firm hiring that I do not understand. One of the justifications for raising the grading curve is that it makes the students more competitive. The implication is that the big firms go by grades and not class rank. Colleagues who have practiced with those firms confirm this is the case. Certainly they must waste more interview time on students with inflated GPAs than with a few transfers.

I know more than a few students who transferred to Loyola from Southwestern and other tier 3 law schools. All deeply regret their decision. For example, one friend had a full scholarship at Southwestern and did very well there during his 1L year. Caught up by Loyola's deceptive image, he transferred here thinking it was a step up. Needless to say he regrets that decision.

I certainly didn't intend to dispute your hypothesis based on individual student experiences, and apologize for not being more clear. I believe that the broad assumptions on which your hypothesis rests may not be valid, at least for some schools, and I worry that you may be extrapolating beyond the data available if it consists only of individual employer experiences and data about net transfers (without prior numbers for comparison).

To add to the data, I transfered to Boalt and received need based grant aid (not much the first year because I had worked before law school and they went off of my completed tax returns for the prior year but the maximum amount the following year). As for grade inflation, I won't argue that it isn't present, because, although Boalt does curve all classes, the curve is slightly relaxed in smaller classes and not all 2L and 3Ls try as hard as during their first year (though the top of the class often does because they are interested in clerkships, teaching, and other jobs for which their entire record matters). For my year and the year before mine, I know that more than 10% of our transfer classes graduated in the top 10%. Now that I'm working, I tend to see a lot resumes from transfers from a variety of schools who have done exceptionally well, though it is obviously difficult to know how many total transfers there were in their classes to get an accurate picture of their relative performance.

I get the impression that most schools are similar to Boalt in their admission policies, and only a handful are trying to either increase their revenues or game the rankings system by letting in underqualified transfers, but I'd love to see more data and know which schools are responsible for an unfortunate potential new trend.

My post has absolutely nothing to do with criticizing the merit or ability of individual transfer students; it is about a shift in transfer policy (i.e., group averages) overtime in order to boost US News rankings. This shift will not explain the experiences of all students who have transferred between law schools over the last 15 years. Many students fit the old model of strong 1L performers; many schools have not changed their standards in an attempt to game their US News input. So individual examples that are contrary to my shift-in-policy hypothesis are not very probative. At several points in this thread, I have acknowledged that examples of traditional transfer model are still present. But that does not alter by broader point.

That said, you raise a couple of points worth discussing:

1) Financial aid. If you received grant aid (as opposed to loans), I would be interested in knowing more. If a school is focusing on recruiting excellent transfer students that will reflect well on the institution (and less interested in scholarship money being used for short term ranking purposes), I would like to know which school it is as a starting point for categorizing trends and schools.

2) More 1L's end up in the Top 10%. I have never seen statistical evidence of this claim, though most law school graduates could do a back of the envelope calculation based on who transferred and who graduated Order of the Coif. The cautionary note, however, is that 2L and 3L grades are often under a different grading curve (or no grading curve at all), so on average 2L and 3L GPA's are higher than 1L GPA. That was certainly the case in the sample I used in my 2004 Texas Law Review study. So the final GPAs of transfer students (avg of 2L and 3L years) versus non-transfers (avg all 3 years) is an apples to oranges comparison. The inferences on relative performance have to be qualified. Finally, if a school follows a model of accepting only high achieving transfer students (i.e., the schools that are not the subject of my post) then the excellent performance would, to my mind, more than justify the transfer policy.

I guess my problem with this hypothesis is that it assumes transfers do not receive financial aid. At least at the T15 school I transferred to, they do. Transfers also finish disproportionately in the top 10% of the class, so there is probably a problem with the assumption that schools are accepting relatively poorly qualified transfers as well. Perhaps my school was an aberration, but I think what it is much more likely is the aberration is school Y, and that we should not be making generalizations based upon a few interviewers' anecdotes.

"2004 study in the Texas Law Review, which included data from a national law school, LSAT was a stronger predictor of grades for transfer students that 1L admitted students."

One model for the transfer student is "High LSAT, low uGPA, initially placed in Tier 2 but got top grades 1L year." It makes sense that this would be the most common story because 1) one can't really do anything to cover a low LSAT in law school, and 2) you showed in your study that LSAT and 1L grades were highly correlated on the most common types of law school exam.

In fact given 2), it is very likely that students with a high LSAT relative to their 1L peers will succeed, even if their relative uGPA is low. I knew or believed before I started law school or read your study that my LSAT scores would be better predictors of how I would do on exams than what I did or drank in engineering school.

So maybe more transfer students are high LSAT scorers with some now disproven defect in their uGPA. If that is true, then it is not suprising that LSAT better predicts transfer grades than 1L grades. The transfer students are the ones most attuned to exploit the correlation between LSAT and timed essay tests that you discovered in your research. That is how they got transfered.

I actually do not think that the education at T15 schools is that much better than in Tier 2. I spent 3 years in law school reassuring my peers with slogans like "it's the same law everywhere." When I have worked alongside Yale and Harvard grads, I haven't seen any evidence of secret knowledge. I subscribe to Yale L.J. and there are professors at Yale that I would love to work with, but I also love my classmates dearly and wouldn't (indeed didn't) try to trade them in.

But I ran up against a hard reality when I tried to push the boundaries of what an IU credential would enable. There were over 40 appeals court clerkships that went to non-graded (and thus presumably middle of the class) yalies. We had but one interview for our top student at the time. Our second student got no clerkship interviews. Large firms follow a similar pattern, progressively narrowing their grade cutoffs as they move down the US News rankings. Most boutique firms will not even visit Tier 2 except perhaps near their offices.

You ask for a rational explanation why a person unwilling to consider median students at a Tier 2 school should consider those same students after they transfer. Well, I ask why would a person, shown willing to comply with a T15 school's no-screening policy, and shown willing to hire median students from T15 schools, nevertheless balk at transfers? We agree that it is not about faculty CVs, the faculty could positively influence transfer students as easily as anyone else.

Firms and judges willingly hire from a broader pool of students at higher ranked schools. B+s at Chicago will get you hired faster than A-s at IU. So clearly employers are using law school admissions, which are largely determined by a LSAT/GPA:USNews formula, as a proxy to reduce their screening costs. You have presented evidence that firms are suspicious of transfers and would prefer to exclude them from the pool. That is even more evidence that employers prefer to decide based on the initial assignment rather than the less simply quantifiable 3L output.

This is why I get angry. If employers think the T15 atmosphere matters, then they would allow for the possibility that transfers could absorb it. I have to conclude instead that employers only think the T15 admissions screen matters (hence their dismay when schools game it). That means that employers are hiring attorneys based significantly on their UNDERGRADUATE GPAs, (with small allowances for initial mal-assignment upon proof of top 1L grades.)

As long as top employers overweight admission to T15 schools, the smart play for hierarchy climbers is to buy a transfer and try to blend in. Yes that perpetuates the problem but why should they have to sacrifice their best career shot to demonstrate the flaw in the system? You can talk about imagining better solutions but meanwhile students can't afford to wait around. Legal Education and the Reproduction of Hierarchy was written 25 years ago, I have the hard-bound "Critical Edition" next to me here on a shelf, and yet the good ole hierarchy is still being reproduced. Out of all the years of radical ideas for flattening the access curve, the only reliable tool to emerge has been guilt over lack of racial and gender diversity, and that by definition can't help everyone.

If you really want to know what I think should be done... schools like IU should just start acting like T15 and self-start. Eliminate grades, start a Supreme Court clinic like Stanford, start online law reviews and forums like Yale. Take all the money going to USNews maintenance and dump it into the alumni network and career office, try to seed actual law firm and non-profits startups out of the clinical programs.

I can give you 25 reasons that will never happen, each more depressing than the last, but it is nice sometimes to hope for it, before going right back to being pragmatic.

1) I completely agree with everything said in your post, though I can imagine better hierarchy-busting mechanics than transfer students. Remember that the transfer-accepting schools are reinforcing that status through these gaming mechanisms.

2) I am a Moneyball devotee. I have long said that I would love the opportunity to build a great law firm (or a great law school faculty) through the scratch and dent bin of the law school hierarchy. I am not buying to the rigid law school cutoffs. But from the law firm perspective, if you are not going to interview students at the 50th percentile a Tier 2 school, why would you interview them just because they transferred to a Top 15 school (and are willing to pay full tuition for the privilege)? Is the education really any better, especially when faculty pay is largely based on scholarship rather than teaching? The best I can tell, it is the inputs (i.e., the students) that attract employers to highly ranked schools, not the c.v.'s of faculty.